UK: Sharia-Compliant Student Loans?

The documentary, filmed by the BBC, proved what had long been suspected: that Sharia courts... routinely issue rulings according to Sharia law that are at odds with British law.

Paragraph 2.3 of the guidelines of the Law Society of Britain suggests that Sharia law could overrule British law in inheritance disputes.

Critics say the controversy is just the latest example of how the British legal and financial systems are being steadily transformed to comply with Sharia law.

The British government has launched a public consultation on whether or not to introduce student loans that are compliant with Islamic Sharia law, which forbids loans that involve the payment of interest.

The move to seek input from the general public comes amid rising complaints from Muslim students, who argue that the existing interest-based student loan system is unfairly forcing them to choose between getting a university degree and staying true to their religious beliefs.

The government says the establishment of a scheme that would enable Muslim students to finance their degrees in a way that complies with Islamic principles would "ensure that anyone with the ability and desire can go to university."

"I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world." — UK Prime Minister David Cameron addressing the World Islamic Economic Forum in London on October 29, 2013. (Image source: 10 Downing St. Facebook page)

Critics counter that the dispute over interest-bearing student loans follows stepped-up demands for Sharia-compliant banking and insurance as well as credit cards, mortgages and pension funds, which—taken together—are contributing to the establishment of parallel Islamic financial and legal systems in Britain.

The alternative financial model involves a mutual fund pooling scheme (known as takaful in Arabic), whereby prospective students would withdraw money from a Sharia-compliant fund to pay for school. Upon graduation they would make a series of repayments back into the same fund to help pay for the education of other students who come along after them.

In an effort to address concerns that Muslim students would end up paying less than non-Muslims, the government says the fund would be set up in such a way so as to ensure that repayments are made at the same rate as students who take out traditional student loans.

The government's consultation document says "this model of student finance product was proposed and developed by experts in Islamic finance and has been approved by the Sharia Supervisory Committee of the Islamic Bank of Britain." It continues:

The model's underlying principle is one of communal interest and transparent sharing of benefit and obligation, with the repayments of students participating in the fund being used to provide finance to future students who select to join the fund. This ensures that all members of the fund benefit equally from it.

Students participating in the fund would not be borrowing money and paying it back with interest to a third party, which would not be compliant with Sharia law. Instead, the Takaful fund will be established with an initial amount of money that can be donated to the fund or on the basis of Qard Hasan (interest-free loan) and based on a concept of mutual participation and guarantee.

Students will obtain finance from the fund by applying in a similar manner to the conventional loan. The contract will be based upon a unilateral promise guaranteeing that they will repay a Takaful contribution—which is perceived as a charitable contribution from a Sharia perspective for the benefit of the members of the fund. Monies will be released once the contract is signed. Repayment will be made to the fund once they are in employment and earning above the repayment threshold, which would be set at the same level as for traditional student loans.

The consultation—which was unveiled on April 3 and will run until June 12—is in response to pressure from several Muslim lobbying groups who argue that sweeping government reforms to higher education that came into effect in September 2012 are discriminatory against Muslim students.

The reforms—aimed at improving the financial sustainability of the British university system by shifting the financial burden from taxpayers to graduates—tripled the cap on tuition fees to £9,000 ($15,000; €11,000). The new system also requires graduates who earn above £21,000 ($35,000) to pay interest on student loans of up to 3 percent above inflation.

The London-based Federation of Student Islamic Societies (FOSIS) says the requirement to pay interest on student loans is unacceptable for the estimated 115,000 Muslim university students in Britain.

In an interview with The Independent, a FOSIS spokesman said: "Under Islamic law interest is seen as something that is prohibited. Previously, the interest rate was at the market rate of inflation. The problem now is that the interest is above the market rate. Because the rate of interest is above the rate of inflation, it is quite blatant usury."

FOSIS says it knows of many Muslim students have who decided against going to university because of the new system of student loan repayments.

In our view, there are thousands of Muslim students, each and every year, who are effectively being denied access to a university education because of the current interest based system of student loans.

Given Islam strictly prohibits both the paying and receiving of interest, many Muslim students face a conflict between funding their university course through taking a government backed interest-bearing loan and practicing their faith. As a result, thousands choose to forgo the massive benefits a university education can confer.

Denying these principled young people access to university is an incredibly short sighted policy which will condemn tens of thousands of practicing Muslims to permanently lower career and life opportunities, hence storing up social cohesion and equality issues for decades to come.

The group says it welcomes the government's "promising, yet long overdue step" but complains that "it will take 3-4 years before an alternative model becomes a reality, not only because of the need to pass legislation, but also because they need to then carry out a feasibility study, and properly test an alternative model. We think this is way too long and will leave many Muslim students stranded in the interim."

Others complain the government is creating a scheme that is only superficially avoiding interest and thus is not actually Sharia-compliant.

Sheikh Suhaib Hasan, a Muslim hardliner who runs the UK Islamic Sharia Council, is quoted by The Independent as saying: "By limiting the repayments to a benchmark similar to that of conventional bank interest rates, Sharia-compliant schemes I think are nothing but a smokescreen through which a prohibited matter turns into a permitted one, so it's better to leave it as it is."

Meanwhile, young Muslims interviewed by The Guardian are indifferent to the government's initiative and say they do not see the point in Sharia-compliant student loans.

Critics say the controversy over student loans is just the latest example of how the British financial and legal systems are being steadily transformed to comply with Sharia law.

In March 2014, it emerged that Islamic law is to be effectively enshrined in the British legal system for the first time under guidelines to help lawyers draft Sharia-compliant wills and estate planning documents.

Ground-breaking guidelines approved by the Law Society—the main professional association representing and governing the legal profession in England and Wales—provide details on how British lawyers should draft inheritance documents in order to comply with Islamic rules, which deny women an equal share of inheritances and exclude non-Muslims altogether.

The documents, which would be recognized by British courts, prevent children born out of wedlock—and even those who have been adopted—from being counted as legitimate heirs. In addition, anyone married in a civil ceremony or in a church could be excluded from inheritance under Sharia law, which recognizes only Muslim weddings for inheritance purposes.

Paragraph 3.6 of the guidelines recommends that some wills include a declaration of faith in Allah that would be drafted at a local mosque, and paragraph 5.2 hands responsibility for drawing up some papers to Sharia courts. Paragraph 2.3 of the guidelines suggests that Sharia law could overrule British law in inheritance disputes.

In April 2013, a documentary secretly filmed inside several of the 85 Islamic Sharia Law courts operating in Britain exposed the systematic discrimination that many women are suffering at the hands of Muslim jurists.

The documentary—Secrets of Britain's Sharia Courts—was filmed by the British Broadcasting Corporation and proved what had long been suspected: that Sharia courts, which operate in mosques and houses across Britain, routinely issue rulings on domestic and marital issues according to Sharia law that are at odds with British law.

In 2012, the British government began offering Muslim workers a Sharia-compliant pension fund in the public sector. A new government agency, the National Employment Savings Trust (NEST), will give Muslims who do not already have a company pension the option of investing in the HSBC Life Amanah Pension Fund, a Sharia-compliant pension scheme. The initial target market comprises some 200,000 Muslims in Britain.

In June 2011, Pointon York, an independent financial services company based in Leicestershire, announced that it would begin offering four Sharia-compliant Self-Invested Personal Pensions (SIPP) products that comply with Islamic law.

Pointon York was the first specialist SIPP provider to receive Sharia-compliant accreditation by the Islamic Bank of Britain (IBB), which has pioneered Islamic retail banking in the United Kingdom. The IBB will supervise the entire life-cycle of Pointon York's pension funds to ensure full compliance with Sharia legal principles.

Muslim families in Britain can already acquire Sharia-compliant baby bonds under the British government's Child Trust Fund scheme. In 2008, Britain's Financial Services Authority (FSA) authorized the establishment of the country's first Islamic insurance company as well as the country's first Sharia MasterCard, called the Cordoba Gold MasterCard.

In 2009, a report titled "Sharia Law or One Law for All?" found that scores of unofficial tribunals and councils regularly apply Islamic law to resolve domestic, marital and business disputes, many operating in mosques. The report warned of a "creeping" acceptance of Sharia principles in British law.

Soeren Kern is a Senior Fellow at the New York-basedGatestone Institute. He is also Senior Fellow for European Politics at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group. Follow him onFacebook and onTwitter.

Comment on this item

11 Reader Comments

Terence Curry • Apr 30, 2014 at 08:26

The statement is made that these loans are interest free to conform to sharia law, but then goes on to say that after graduation the recipient pays a series of payments into the fund. Well what is that except interest by any other name?

Another facet of this is that we are in the midst of creeping Islamisation at all level. People should be thinking about this sort of thing before they decide to come to Britain, and if the conditions and our way of life do not suit, should stay away. It is not an option to come here, and then start changing the country to the way the country they left was run, yet that is precisely what is happening. That is not integration, and certainly not the way of diversity at all. It is a take over bid, and they are winning

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Ephesian • Apr 29, 2014 at 12:08

Why should Muslim students be treated any differently from anybody else? The "we can't accept loans that involve the payment of interest" doesn't wash. How very convenient for them. In any case sharia law is not the law of Britain and I find that this bunkum is anti-Christian, and as a Christian country then we can accuse the Muslims of Christianophobia.

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Terence Curry Ephesian • May 8, 2014 at 04:03

Ephesian is quite correct. We had laws, and a justice system, before these invaders came. It is for them to fit in with our society, not for us to be forced or coerced to conform to theirs. If they don't like it they have a choice. Tolerate it, or stay away. Successive governments have progressively made it easier for them to settle here, but it is us, the very people who voted for them, and gave them our trust who will pay the price; not them.

It doesn't matter whether we are talking about sharia courts, or Halal meat, or as in this case allegedly interest free loans. It all comes down to the same thing. They should conform to us, not force us to conform to them. We are no longer a world power, we are definitely second, and getting on for third world. Has anyone tried analysing why this is?

Whenever some half baked attempt to introduce some sanity back in, such as the recent attempt to ban the niqab in universities, the demonstrations were immediate. Muslims objected to any possible hint of curtailing their rights. What of my rights? This is my country. I object to the alien sight of women imitating Guinness bottles in public. It upsets me that I can no longer go into a certain fast food chain with my grandchildren, because halal slaughtered meat is used, and that is alien to me (it is also used in prisons, in hospitals and, most disgustingly, in schools). If they cannot eat meat killed by humane means, they have two choices - go vegetarian, or go to some country where they can live according to their very elastic principles.

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Terence Curry Ephesian • May 12, 2014 at 03:34

Ephesian is (as usual) spot on. While accusing us of Islamophobia, they are in fact actively practicing, for want of a better way of putting it, Christianophobia. Their rights must be upheld and ever expanded, while our rights are of far less importance, and getting fewer by the day.

Any possible hint of cutting their rights call for immediate demonstrations, with professionally produced banners and placards proclaiming that Islam will triumph, and behead anyone who disagrees with this view. How can this be the wish of any benevolent, all merciful deity? Is this what we can look forward to if and when they are ever able to enforce their will?

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David Geffen • Apr 29, 2014 at 09:51

Let the UK/other Muslims reimburse students for interest paid for the loans. Since it is a religious issue, that is their responsibility. And if they are disallowed from doing that even, let the Muslim Council grant replacement non-interest-bearing loans using Muslim funds. They control the world's oil wealth so this should not be a big deal.

Why do the Muslims feel entitled to charge the world for their outlook? They are welcome to follow their religion, but it is not the state's responsibility in every instance to be guilt-driven to pay. Other religions cope, without making great shouts of outrage. Perhaps they should direct their outrage at those within their religion who bring disgrace on the rest.

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Isabel • Apr 28, 2014 at 22:22

They can study at home. They have to accept the laws of the country where they are. They cannot change the laws of the country to which they have gone. Goes against their religion? Stay at home.

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Bart Benschop • Apr 28, 2014 at 19:23

Dear Sir,

For those Muslim students who submit to Al Shari'iah, The Law of Allah, His Name be praised who are forbidden by this Law to take out a loan with interest should follow The Law of Allah which stipulates that all knowledge is contained in Al Qur'an, Allah's Book. They should learn Al Qur'an by rote to gain a good Muslim education.

If the students are bright they could then follow up with Al Shari'iah and for the brilliant ones there is also Al Hadith, The Doings and Sayings of Muhammad, Allah's Messenger. British Universities do not cater for this study nor is there any need for loans. These Universities only teach subjects that are Haram, unclean and studying those is an enormity punishable by death. Not only that, they also teach women who go about in miniskirts and revealing decolletees; Muhammad, The Messenger of Allah, would not approve of that, you can be certain.

Kind regards,

Bart Benschop

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John • Apr 28, 2014 at 13:05

Do Sharia loans apply equally to females as males? If not loan interest, who is funding these loans...Saudi Arabia oil money or is it money from human trafficking and drug sales? Is it money collected from taxing non-Muslims/infidels? We are soon to have this problem in US and Canada. Send the Muslims back to their home countries using the "Right of Return." Surely their countries of origin need educated Muslims and no greater sign of good will could be made than to give the Muslim countries educated and civilized Muslims to help them get out of poverty.

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Avi Keslinger • Apr 28, 2014 at 09:37

Why not offer Sharia-compliant investments if there is a market? Or for that matter Halacha-compliant, Canon Law-compliant and whatever else investors want? The same for inheritance. If under civil law people can leave all of their money to their pets and disinherit their relatives, why not let them write Sharia wills, Halacha wills, etc.?

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Graham Swift • Apr 28, 2014 at 06:37

Yet another example of how the UK is becoming an Islamic Caliphate, created by Conservative, Lib Dem and Liebour politicians in Westminster. In fact I'm surprised that David 'Dimwit' Cameron hasn't invited Anjem Choudary to join the coalition cabinet. No other country in the Western civilized world would allow an alien culture to practise its own laws and disregard the laws which apply to their native country. Only the UK.

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FNOL • Apr 28, 2014 at 06:02

The same Law Society mentioned is now offering Sharia Law CPD or ongoing training courses to high street lawyers, the first of which has been sold out according to the Daily Telegraph today. The Brits seem to think they can cleverly outwit the Islamists by making a quick buck out of Sharia finance and Sharia law, but they seriously underestimate the deviousness of the ideologues they are working with.

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